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Tax Privileges Within the Eastern Economic Corridor

On 28 June 2016, the Cabinet approved the Eastern Economic Corridor Project (or EEC Project), a continuation of the Eastern Seaboard Project, which will include tax privileges for both businesses and individuals. In addition, the government also issued the Order of the Head of National Council for Peace and Order (NCPO) No. 2/2560 under section 44 of the Constitution of the Kingdom of Thailand (Interim) B.E. 2557 (2014) to prescribe the scope and details of the EEC development in order to facilitate more rapid and concrete progress. Please find the details of the tax privilege scheme for EEC below.

1. Tax privilege scheme under the Investment Promotion Act B.E. 2520 (1977) and its amendments and the National Competitiveness Enhancement for Target Industries Act B.E. 2560 (2017) to encourage businesses to operate in the EEC.

Any business, located in the three provinces of Chachoengsao, Chonburi, or Rayong which either operates (1) in one of the target industries which have been deemed a new growth engine, namely, next-generation automotive, smart electronics, and affluent medical and wellness tourism, or (2) a support industry that will develop the EEC area, namely infrastructure, logistics, and tourist attractions, will receive a 50 percent corporate income tax reduction for an additional five years after the business's original corporate tax exemption or reduction under its Board of Investment (BOI) certificate ends.

To receive the above tax privilege, businesses must submit their BOI application by 29 December 2017 (this may be extended by the BOI).

2. Tax privilege scheme to encourage expert foreigners to work in the EEC zone.

The personal income tax rate for executives, specialists and researchers who work under an employment agreement with a company or juristic partnership that operates a business related to the ten target businesses in the EEC area will be reduced to a flat 17 percent from the otherwise progressive tax rate (which has its highest tax bracket at 35 percent of net income). However, if an individual falls within a tax bracket of less than 17 percent and the taxpayer consents to withhold tax at the rate of 17 percent, the 17 percent withholding tax will not be subject to the annual tax calculation.

The following are the main criteria required to qualify for the tax privilege scheme:

1. The individual's place of work must be located in the EEC area (in the provinces of Chacheongsao, Chonburi, or Rayong)

2. The Revenue Department must be notified about the relevant employee before he or she receives his or her first income

3. Only income which is classified as assessable income under section 40 (1) of the Revenue Code and wholly paid from within Thailand, is eligible for this tax privilege

4. The relevant individual must not have been a tax resident in Thailand prior to the tax year in which the privilege is applied. An individual is deemed a tax resident in Thailand if he or she is physically present in the country for 180 days or more in any given tax year

5. The relevant individual period must be physically present in Thailand no less than 180 days in each year which he or she is to receive the tax privilege. However, the first and last year of employment are exempted from this requirement.

Any additional details under above the tax privilege will be further clarified in Director-General Notifications.

The above details are preliminary. The main law governing the EEC has yet to be issued, and we will update you again accordingly.